The intricacies of last-mile delivery and reverse logistics have established distribution centres as vital components of the supply chain. The growing demand for quicker delivery times has led to the surge of these facilities on the outskirts of large cities or in well-connected areas. In this article, we will explore distribution centres, detailing their functions, significance in Logistics 4.0, and how they differ from traditional warehouses.
Definition of a Distribution Centre
A distribution center (DC) is a logistics facility focused on receiving and dispatching goods efficiently to customers, warehouses, or production sites. They serve as modern alternatives to traditional storage, aimed at reducing costs and expediting delivery and returns. Typically located near population hubs or ports, DCs consist of organized areas for goods receipt, dispatch, and staging. Increasing demand for faster delivery has led to the use of transportation systems like conveyors, replacing staging areas. High-volume DCs often utilize sorters and automated loading systems, with industries like food and pharmaceuticals innovating with designs such as dark stores for online orders.
Operation of a Distribution Centre
Distribution centres are responsible for receiving products from various sources, organizing them, and shipping them to their destinations as quickly as possible. Therefore, these facilities maintain minimal inventory levels and typically store products for short durations, especially high-turnover items.
The primary operations (and most common storage systems) in distribution centres include:
- Goods Receipt: Fulfilment centres receive products from suppliers, other company warehouses, or incorrect orders. After unloading trucks at loading docks, operators utilize handling equipment like forklifts and pallet jacks to transport goods to flow channels, which act as temporary storage buffers, before moving them to the storage area.
- Storage: In non-automated DCs, products are placed on pallet or high-density racks, depending on the stock management strategy employed (e.g., LIFO - last in, first out, or FIFO - first in, first out). In automated facilities, a conveyor system moves orders from the receiving area to the storage zone, where goods are verified at a pallet checkpoint and relocated according to the warehouse management system (WMS).
- Picking: This operation is crucial in a distribution centre. These facilities often incorporate storage systems like carton flow racks and mezzanine floor racking to optimize operator workflows. Furthermore, in alignment with Industry 4.0, high-throughput pick stations complement automated storage and retrieval systems (AS/RS), allowing operators to achieve up to 1,000 picks per hour.
- Dispatch: Manual handling equipment or conveyors transport goods from storage to the dispatch area. Due to the high volume of goods in DCs, it’s increasingly common to install sorters that automatically classify orders and direct them to the appropriate carrier’s cage or container.
Differences Between a Distribution Centre and a Warehouse
While the terms distribution centre and warehouse are often used interchangeably, they are not synonymous. Unlike conventional warehouses, which primarily focus on storing goods and preparing orders, distribution centres specialize in receiving and dispatching goods to minimize delivery times for end customers. This is why distribution centres are often associated with cross-docking.
In a typical supply chain, warehouses supply goods to DCs, which sort products based on various criteria (carrier routes, turnover strategies, etc.) and dispatch them according to established timelines and methods. Generally, traditional warehouses exist alongside logistics providers—particularly 3PLs—that operate distribution centres where they receive products from customers and organize them by delivery route, supplier, SKU, and more.
Moreover, DCs have taken on the responsibility of managing the complexities of both last-mile delivery and reverse logistics. Positioned close to major urban areas, they are the first point of contact for handling incorrect orders returned by customers.
Are Distribution Centres Prepared for Logistics 4.0?
The challenges associated with Logistics 4.0 present opportunities for those equipped to respond effectively. Conversely, those who fail to adapt risk making costly mistakes that could jeopardize their companies' futures. Distribution centres are foundational to achieving success in logistics management. Key issues facing this sector include delivering faster, more accurately, and competitively, as well as handling reverse logistics optimally.